Investor Relations

LEWISTON, Maine, April 25, 2017 (GLOBE NEWSWIRE) -- Northeast Bancorp ("Northeast" or the "Company") (NASDAQ:NBN), a Maine-based full-service financial services company and parent of Northeast Bank (the "Bank"), today reported net income of $3.5 million, or $0.39 per diluted common share, for the quarter ended March 31, 2017, compared to net income of $1.8 million, or $0.19 per diluted common share, for the quarter ended March 31, 2016. Net income for the nine months ended March 31, 2017 was $8.3 million, or
$0.93 per diluted common share, compared to $5.4 million, or $0.57 per diluted common share, for the nine months ended March 31, 2016.

The Board of Directors has also declared a cash dividend of $0.01 per share, payable on May 22, 2017 to shareholders of record as of May 8, 2017.

"Our strong growth in fiscal year 2017 continued in the third quarter," said Richard Wayne, President and Chief Executive Officer. "We achieved record earnings of 39 cents per share through solid loan volume, purchased loan transactional income and SBA gains. Our Loan Acquisition and Servicing Group produced $89.7 million of loans, our SBA Division closed $22.6 million of loans, the purchased loan portfolio yielded 11.9%, and the SBA gain on sale was $951 thousand. In addition, in the current quarter, we strategically repositioned our balance sheet
with the payoff of $48.0 million of secured loans to broker-dealers and the sale of a commercial loan portfolio of $18.3 million. The payoff of these lower yielding assets provides capacity for higher yielding loan growth in the future. This quarterly activity helped drive our return on equity to 12.0%, our return on assets to 1.4%, and our efficiency ratio to 59.9%."

As of March 31, 2017, total assets were $1.0 billion, an increase of $40.9 million, or 4.2%, from total assets of $986.2 million as of June 30, 2016. The principal components of the change in the balance sheet follow:

1. Bank wide, the Company originated $125.4 million of loans during the quarter ended March 31, 2017. Loans generated by the Bank's Loan Acquisition and
Servicing Group ("LASG") totaled $89.7 million, which consisted of $7.9 million of purchased loans, at an average price of 91.3% of unpaid principal balance, and $81.8 million of originated loans. The Bank's Small Business Administration and United States Department of Agriculture ("SBA") Division closed $22.6 million of new loans during the quarter, of which $16.5 million were funded. In addition, the Company sold $9.9 million of the guaranteed portion of SBA loans in the secondary market, of which $2.6 million were originated in the current quarter and $7.3 million were originated or purchased in prior quarters. Residential loan production sold in the secondary market totaled $15.5 million for the quarter.

In
totality, the loan portfolio - excluding loans held for sale - increased by $49.3 million, or 7.1%, compared to June 30, 2016, and decreased by $25.2 million, or 3.3%, compared to December 31, 2016. The decrease from December 31, 2016 is primarily attributable to the payoff of $48.0 million of secured loans to broker-dealers and the sale of a commercial loan portfolio of $18.3 million which, combined, had a weighted average yield of 1.92%.

The following table highlights the changes in the loan portfolio for the three and nine months ended March 31, 2017:

Loan Portfolio Changes

Three months ended March 31, 2017

Nine months ended March 31, 2017

(Dollars in thousands)

LASG originations and acquisitions

$

89,667

$

237,578

SBA and USDA funded originations

16,549

56,853

Community Banking Division originations

13,036

63,776

Payoff of secured loans to broker-dealers

(48,000

)

(48,000

)

Commercial loan
portfolio sale

(18,259

)

(18,259

)

SBA and residential loan sales

(25,471

)

(92,956

)

Payoffs, pay-downs and amortization, net

(52,732

)

(149,700

)

Net change

$

(25,210

)

$

49,292

As previously discussed in the Company's SEC filings, the Company made certain commitments to the Board of Governors of the Federal Reserve System in connection with the merger of FHB Formation LLC with and into the Company in December 2010. The Company's loan purchase and commercial real estate loan availability under these conditions follow:

Basis
for Regulatory Condition

Condition

Availability at March 31, 2017

(Dollars in millions)

Total Loans

Purchased loans may not exceed 40% of total loans

$

101.0

Regulatory Capital

Non-owner occupied commercial real estate loans may not exceed 300% of total capital

$

172.3

An overview of the Bank's LASG portfolio follows:

LASG Portfolio

Three Months Ended March 31,

2017

2016

Purchased (1)

Originated

Secured Loans to Broker-Dealers

Total LASG

Purchased

Originated

Secured Loans to Broker-Dealers

Total LASG

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

8,609

$

81,806

$

-

$

90,415

$

24,400

$

27,846

$

-

$

52,246

Net investment basis

7,861

81,806

-

89,667

21,934

27,846

-

49,780

Loan returns during the period:

Yield

11.89

%

6.44

%

1.13

%

8.68

%

9.88

%

5.83

%

0.50

%

7.15

%

Total Return (2)

11.95

%

6.44

%

1.13

%

8.71

%

9.88

%

5.82

%

0.50

%

7.15

%

Nine Months Ended March
31,

2017

2016

Purchased (1)

Originated

Secured Loans to
Broker-Dealers

Total LASG

Purchased

Originated

Secured Loans to Broker-Dealers

Total LASG

(Dollars in thousands)

Loans purchased or originated during the period:

Unpaid principal balance

$

76,511

$

169,831

$

-

$

246,342

$

88,128

$

78,752

$

-

$

166,880

Net investment basis

67,747

169,831

-

237,578

81,245

78,752

-

159,997

Loan returns during the period:

Yield

11.77

%

6.10

%

0.82

%

8.36

%

11.54

%

5.75

%

0.50

%

7.97

%

Total Return (2)

11.80

%

6.10

%

0.82

%

8.37

%

11.57

%

5.74

%

0.50

%

7.98

%

Total loans as of period end:

Unpaid principal balance

$

268,651

$

299,340

$

-

$

567,991

$

266,223

$

170,085

$

60,000

$

496,308

Net investment basis

237,569

299,340

-

536,909

233,650

170,085

60,000

463,735

(1) Purchased loan balances include loans held for sale of $973 thousand.

(2) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, and other noninterest income recorded during the
period divided by the average invested balance, which includes loans held for sale, on an annualized basis. The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter.

2. Deposits increased by $9.9 million, or 1.2% for the quarter, attributable primarily to growth in non-maturity (demand, savings and interest checking, and money market) accounts, which increased by $24.5 million, or 4.9%, offset by a decrease in time deposits of $14.6 million, or 4.3%. For the nine months ended March 31, 2017, deposits increased $49.0 million, or 6.1%, due to growth in non-maturity accounts of $79.2 million, or 17.6%, offset by a decrease in time deposits of
$30.1 million, or 8.6%.

3. Shareholders' equity increased by $2.1 million from June 30, 2016, primarily due to earnings of $8.3 million, offset by $6.9 million in share repurchases (representing 645,238 shares). Additionally, there was stock-based compensation of $689 thousand, a decrease in accumulated other comprehensive loss of $313 thousand and $268 thousand in dividends paid on common stock.

Net income increased by $1.7 million to $3.5 million for the quarter ended March 31, 2017, compared to $1.8 million for the quarter ended March 31, 2016.

1. Net interest and dividend income before provision for loan losses increased by $3.2
million for the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016. The increase is primarily due to higher transactional income on purchased loans and higher average balances in the total loan portfolio. This increase was partially offset by higher rates and volume in the deposit portfolio and the effect of the issuance of subordinated debt.

The following table summarizes interest income and related yields recognized on the loan portfolios:

Interest Income and Yield on Loans

Three Months Ended March 31,

2017

2016

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking Division

$

188,748

$

2,402

5.16

%

$

219,001

$

2,592

4.76

%

SBA

44,538

678

6.17

%

28,193

402

5.73

%

LASG:

Originated

256,778

4,075

6.44

%

159,976

2,317

5.83

%

Purchased

245,135

7,184

11.89

%

224,710

5,518

9.88

%

Secured Loans to Broker-Dealers

27,933

78

1.13

%

60,001

75

0.50

%

Total LASG

529,846

11,337

8.68

%

444,687

7,910

7.15

%

Total

$

763,132

$

14,417

7.66

%

$

691,881

$

10,904

6.34

%

Nine Months Ended March 31,

2017

2016

Average

Interest

Average

Interest

Balance (1)

Income

Yield

Balance (1)

Income

Yield

(Dollars in thousands)

Community Banking Division

$

199,566

$

7,150

4.77

%

$

220,582

$

7,893

4.76

%

SBA

38,867

1,771

6.07

%

21,590

957

5.90

%

LASG:

Originated

219,140

10,030

6.10

%

138,760

5,991

5.75

%

Purchased

236,822

20,925

11.77

%

211,519

18,347

11.54

%

Secured Loans to Broker-Dealers

41,409

256

0.82

%

60,004

225

0.50

%

Total LASG

497,371

31,211

8.36

%

410,283

24,563

7.97

%

Total

$

735,804

$

40,132

7.27

%

$

652,455

$

33,413

6.82

%

(1) Includes loans held for sale.

The various components of transactional income are set forth in the table below entitled "Total Return on Purchased Loans." When compared to the three and nine months ended March 31, 2016, transactional income increased by $1.4 million and $831 thousand, respectively. The total return on purchased loans for the three and nine months ended March 31, 2017 was 11.95% and 11.80%, respectively. The increase over the prior comparable periods was primarily due to higher average balances and transactional income in the three and nine months ended March 31, 2017. The following table details the total return on purchased loans:

Total Return on Purchased Loans

Three Months Ended March 31,

2017

2016

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

4,914

8.13

%

$

4,606

8.25

%

Transactional income:

Gain on loan sales

-

0.00

%

-

0.00

%

Gain on sale of real estate owned

36

0.06

%

1

0.00

%

Other noninterest income

-

0.00

%

-

0.00

%

Accelerated accretion and loan fees

2,270

3.76

%

912

1.63

%

Total transactional income

2,306

3.82

%

913

1.63

%

Total

$

7,220

11.95

%

$

5,519

9.88

%

Nine Months Ended March 31,

2017

2016

Income

Return (1)

Income

Return (1)

(Dollars in thousands)

Regularly scheduled interest and accretion

$

14,383

8.09

%

$

12,615

7.94

%

Transactional income:

Gain on loan sales

-

0.00

%

-

0.00

%

Gain on sale of real estate owned

55

0.03

%

23

0.01

%

Other noninterest income

-

0.00

%

11

0.01

%

Accelerated accretion and loan fees

6,542

3.68

%

5,732

3.61

%

Total transactional income

6,597

3.71

%

5,766

3.63

%

Total

$

20,980

11.80

%

$

18,381

11.57

%

(1) The total return on purchased loans represents scheduled accretion, accelerated accretion, gains on asset sales, gains on real estate owned and other noninterest income recorded during the period divided by the average invested balance, which includes loans held for sale, on an annualized basis.
The total return does not include the effect of purchased loan charge-offs or recoveries in the quarter. Total return is considered a non-GAAP financial measure.

2. Noninterest income increased by $273 thousand for the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016, principally due to the following:

An increase in gain on sale of other loans of $365 thousand, due to the sale of a Community Banking Division commercial loan portfolio;

An increase in fees for other services to customers of $88 thousand, due to an increase in SBA loan servicing fees; and

An increase in gain recognized on real estate owned and other repossessed
collateral, net of $74 thousand, due to the sale of Community Banking Division real estate owned ("REO").

The increases in noninterest income were partially offset by a decrease in gain on sale of SBA loans of $254 thousand, due to a lower volume sold in the quarter.

3. Noninterest expense increased by $430 thousand for the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016, primarily due to the following:

An increase in loan expense of $431 thousand, largely driven by the expense related to increased loan acquisition and refinance activity, as well as increased REO activity and expense in the period; and

An increase in salaries and employee benefits of $357 thousand, primarily due to severance expense of
$304 thousand recognized in the three months ended March 31, 2017.

The increases in noninterest expense were partially offset by a decrease in other noninterest expense of $390 thousand, primarily resulting from a mortgage insurance recovery from a legacy mortgage insurance premium plan of $167 thousand and a decrease in impairment on servicing assets as no impairment was booked in the three months ended March 31, 2017.

As of March 31, 2017, nonperforming assets totaled $18.6 million, or 1.81% of total assets, as compared to $13.3 million, or 1.32% of total assets, as of December 31, 2016, and $9.5 million, or 0.96% of total assets, as of June 30, 2016. The increase of $5.3 million
from December 31, 2016 is primarily due to three loans placed on non-accrual totaling $4.6 million.

As of March 31, 2017, past due loans totaled $24.1 million, or 3.25% of total loans, as compared to $21.9 million, or 2.85% of total loans, as of December 31, 2016, and $6.9 million, or 1.00% of total loans as of June 30, 2016. The increase of $2.2 million from December 31, 2016 includes two loans totaling $2.1 million which were 30-59 days past due as of March 31, 2017, and have been paid current in April.

As of March 31, 2017, the Company's Tier 1 Leverage Ratio was 12.5%, compared to 13.3% at June 30, 2016, and the Total Capital Ratio was
19.3%, compared to 20.4% at June 30, 2016. The decreases resulted primarily from loan growth and the effect of purchases under the Company's share repurchase program.

Investor Call InformationRichard Wayne, Chief Executive Officer of Northeast Bancorp, and Brian Shaughnessy, Chief Financial Officer of Northeast Bancorp, will host a conference call to discuss third quarter earnings and business outlook at 10:00 a.m. Eastern Time on Wednesday, April 26th. Investors can access the call by dialing
877.878.2762 and entering the following passcode: 10568713. The call will be available via live webcast, which can be viewed by accessing the Company's website at www.northeastbank.com and clicking on the About Us - Investor Relations section. To listen to the webcast, attendees are encouraged to visit the website at least fifteen minutes early to register, download and install any necessary audio software. Please note there will also be a slide presentation that will accompany the webcast. For those who cannot listen to the live broadcast, a replay will be available online for one year at www.northeastbank.com.

About Northeast BancorpNortheast Bancorp (NASDAQ:NBN) is the holding company for Northeast Bank, a full-service bank headquartered in Lewiston, Maine. We offer traditional banking services through the Community Banking Division, which operates ten full-service branches that serve customers located in western, central, and
southern Maine. From our Maine and Boston locations, we also lend throughout the New England area. Our Loan Acquisition and Servicing Group ("LASG") purchases and originates commercial loans on a nationwide basis. In addition, our SBA Division supports the needs of growing businesses nationally. ableBanking, a division of Northeast Bank, offers savings products to consumers online. Information regarding Northeast Bank can be found on its website at www.northeastbank.com.

Non-GAAP Financial MeasuresIn addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures, including tangible common shareholders' equity, tangible book value per share, total return, and efficiency ratio. Northeast's management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should
not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Forward-Looking StatementsStatements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Although Northeast believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in interest rates and real estate values; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which
the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; changing government regulation; the risk that the Company may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Company's financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. These statements speak only as of the date
of this release and the Company does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.

(4) For purposes of calculating this ratio, commercial real estate includes all non-owner occupied commercial real estate loans defined as such by regulatory guidance, including all land development and construction loans.

(5) Core deposits include all non-maturity deposits and maturity deposits less than $250 thousand. Loans include loans held-for-sale.

(6) Includes the core deposit
intangible asset, as well as the servicing rights asset which is included in other assets in the consolidated balance sheets.

(7) Tangible book value per share represents total shareholders' equity less the sum of preferred stock and intangible assets divided by common shares outstanding.